Why trickle-down doesn’t follow

From
Tony Castaldo

I would like to suggest reasons for the failure of “trickle-down” economics that Ha-Joon Chang describes (25 April, p 28). The rich put most of their excess income (which is most of their income) into the stock market and into businesses that are already earning a profit. No jobs are created if two investors trade money for shares of stock. Given a tax break, the excess money just goes to a bigger portfolio and more stuff owned; it doesn’t change the risk sums for the rich.

A higher income tax changes that risk calculation, because in all fiscal systems money spent on expanding a business is tax-deductible. Thus if income tax is high the rich are better off reinvesting excess revenue in actual job creation by trying to grow their businesses, advertise them and compete for customers.

Higher income tax does not necessarily result in greater government income&colon; it can just be the reason for the rich to reinvest. Thus the opposite of trickle-down is true; the higher the income tax, the more attractive job creation is.San Antonio, Texas, US